L'inversione dei tassi di lungo periodo
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Fleursdumal
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Fleursdumal
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U.S. mortgage-backeds wider as investors sell
NEW YORK, July 29 (Reuters) - U.S. mortgage-backed
securities fell on Tuesday morning, and spreads over Treasuries
widened, as most investors hesitated to buy with the bond
market so unpredictable, even though mortgages look cheap now.
"It might be time to look for bargains now, but it's dicey.
You could dip your toe in the water, and find out it's really
molten lava," a fund manager in New York said.
Bond prices broadly rose earlier in the session on Tuesday
after a report said that consumer confidence in July was lower
than expected. But prices have since cooled off.
But mortgage-backed debt investors hesitated to buy even
after Treasuries rose because mortgage rates have risen for
over five weeks and could surge even further, traders said.
Mortgage-backeds thrive when rates are stable.
Rates may rise if upcoming economic reports show the
economy really is improving, traders said.
On Thursday and Friday, a brace of crucial economic reports
are planned, including the Labor Department's employment report
and the Institute for Supply Management's monthly manufacturing
report for July.
That uncertainty helped push Fannie Mae 30-year 5.5 percent
mortgage-backeds 3/32 lower to 100-8/32 on Tuesday morning, for
a bond equivalent yield of 5.268 percent.
Spreads over Treasuries widened as much as 4 basis points,
but gave back much of that widening as the morning wore on, a
trader at a hedge fund said.
Among the sellers of mortgage-backeds were lenders, which
sold about $1.5 billion of securities, a trader at a Wall
Street dealer said. Investors sold securities, too, to hedge
themselves after recent increases in borrowing rates, he
added.
Rising rates reduce the pace of mortgage refinancing,
turning mortgage investments into longer-term instruments and
forcing investors to sell fixed-income instruments including
mortgage-backeds.
((Reporting by Dan Wilchins, Reuters Messaging:
[email protected]; +1 646 223 6320))
Bond Equivalent
Coupon Delivery Price Yield(pct)
30-year Fannie 5.50% <US30FN55AG=MMKR> Aug 100-7/32 5.282
30-year Gold 5.50% <US30GO55AG=MMKR> Aug 100-8/32 5.336
30-year Ginnie 5.50% <US30GN55AG=MMKR> Aug 100-15/32 5.294
15-year Fannie 4.50% <US15FN45AG=MMKR> Aug 98-26/32 4.809
NEW YORK, July 29 (Reuters) - U.S. mortgage-backed
securities fell on Tuesday morning, and spreads over Treasuries
widened, as most investors hesitated to buy with the bond
market so unpredictable, even though mortgages look cheap now.
"It might be time to look for bargains now, but it's dicey.
You could dip your toe in the water, and find out it's really
molten lava," a fund manager in New York said.
Bond prices broadly rose earlier in the session on Tuesday
after a report said that consumer confidence in July was lower
than expected. But prices have since cooled off.
But mortgage-backed debt investors hesitated to buy even
after Treasuries rose because mortgage rates have risen for
over five weeks and could surge even further, traders said.
Mortgage-backeds thrive when rates are stable.
Rates may rise if upcoming economic reports show the
economy really is improving, traders said.
On Thursday and Friday, a brace of crucial economic reports
are planned, including the Labor Department's employment report
and the Institute for Supply Management's monthly manufacturing
report for July.
That uncertainty helped push Fannie Mae 30-year 5.5 percent
mortgage-backeds 3/32 lower to 100-8/32 on Tuesday morning, for
a bond equivalent yield of 5.268 percent.
Spreads over Treasuries widened as much as 4 basis points,
but gave back much of that widening as the morning wore on, a
trader at a hedge fund said.
Among the sellers of mortgage-backeds were lenders, which
sold about $1.5 billion of securities, a trader at a Wall
Street dealer said. Investors sold securities, too, to hedge
themselves after recent increases in borrowing rates, he
added.
Rising rates reduce the pace of mortgage refinancing,
turning mortgage investments into longer-term instruments and
forcing investors to sell fixed-income instruments including
mortgage-backeds.
((Reporting by Dan Wilchins, Reuters Messaging:
[email protected]; +1 646 223 6320))
Bond Equivalent
Coupon Delivery Price Yield(pct)
30-year Fannie 5.50% <US30FN55AG=MMKR> Aug 100-7/32 5.282
30-year Gold 5.50% <US30GO55AG=MMKR> Aug 100-8/32 5.336
30-year Ginnie 5.50% <US30GN55AG=MMKR> Aug 100-15/32 5.294
15-year Fannie 4.50% <US15FN45AG=MMKR> Aug 98-26/32 4.809
Fleursdumal
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Is a 1987-Style Scenario Taking Shape?
Chris Temple, Editor
The National Investor
www.nationalinvestor.com
It was the Summer of 1987. The value of the U.S. dollar against most foreign currencies was falling. Fears of the longer-term impact of escalating budget and current account imbalances were taking their toll. In response to these and related factors, gold had been rising for months. Also in response, Treasury bond yields were rising steadily; the 30-year bond, then the government’s "bellwether," moved up from a level around 7% in the Spring to approach the 10% area.
In spite of all of this and growing discussion about whether the economic fundamentals justified such levels, the stock market incredibly continued to advance. In fact, through August of 1987 the Dow Jones Industrial Average’s performance was simply breathtaking. Shrugging off the growing troubles on the inflation and interest rate fronts and all the rest, the upward momentum fed on itself. Trading at under 2,000 early on in the year, the Dow peaked in August at over 2,700.
We all know what happened next. In just under two months, the Dow shed 1,000 points; most of it came in less than a week, and half of it on Black Monday, October 19. Traders were shell-shocked; after all, nothing of this sort was supposed to ever be able to happen again. Further, we were about to go into an election year; a period when, historically, markets are strong in anticipation of all the goodies to be lavished on the economy and populace by those running for election or reelection.
Yet the stock market crashed in spectacular fashion.
As the dust was settling, President Reagan appointed a commission, headed up by former Treasury Secretary Nicholas Brady, to examine the reasons why the stock market derailed. In the end, the Brady Commission identified Japan-yes, Japan-as the chief culprit. Simply put, both public sector and private investors from that nation had for several months been demanding higher interest rates on the huge quantities of U.S. government debt they were buying. This was due to their concern over U.S. monetary and fiscal policy, both of which were making U.S. obligations relatively less attractive (and more risky) than other sovereign debt. Thus, the Japanese insisted, they wanted much higher returns if they were going to put huge quantities of their own assets into U.S. dollar-denominated securities. Eventually, those higher interest rates overwhelmed the momentum and blind faith that investors had been pricing into equities.
We’re about to enter August, 2003. Again, the foreign exchange value of the U.S. dollar has been declining. Again, the government’s budget and current account deficits are growing rapidly. Again, gold has been in an up trend due to all of this, as well as to its own strong fundamentals as a commodity. And now, long-term bond yields are spiking, as foreign investors are beginning to undermine the market for U.S. debt further.
But-as in 1987-the stock market remains oblivious to all this. Ask the stock market’s bullish advocates, and they’ll tell you that yields are rising due to investors’ optimism over the economy; after all, yields always rise when Wall Street smells economic growth and, thus, rolls money out of Treasuries and into the stock market. And, to be fair, a bit of that is indeed going on.
However, the reasons for the bond market’s sell-off of the last few weeks go way beyond such a simple, intellectually lazy explanation. Investors are ignoring to their eventual peril the fact that increasing quantities of foreign-owned U.S. dollar-denominated obligations are being disgorged-a trend which, if it goes much further, can yet lead to far higher long-term rates, even after the back-up in yields we’ve witnessed since the lows of mere weeks ago.
In 1987, it was primarily the Japanese investors’ refusal to put new money (except at much higher interest rates) into financing America’s growing deficits that caused the eventual meltdown on Wall Street. Now, what we see happening is the selling of GSE (Government-Sponsored Enterprise) paper. Specifically, it’s been acknowledged in recent days that European banks-perhaps including the European Central Bank itself-have been selling some of their holdings of Fannie Mae and Freddie Mac paper. Both deteriorating U.S. monetary and fiscal fundamentals and the increasing accounting questions over those mortgage agencies specifically have apparently led to Europeans deciding that they want to reduce their holdings of assets deemed increasingly risky.
This adds to the woes-and upward pressure on yields-in the Treasury market. GSE’s are among the biggest purchasers of Treasury securities. They also use Treasuries to hedge their mortgage positions; and now, knowledgeable people in the bond pits are warning that the recent back-up in yields and decline in prices of Treasuries could take on lives of their own. This morning, the yield on the current bellwether 10-year Treasury note is moving even higher, taking out the key technical level of 4.25%. With the momentum accelerating, a further sharp rise in yields becomes increasingly likely; and the chances for a rally in bonds that would bring yields back down more becomes remote.
One reason for the increasing danger even after the rise in yields of the last few weeks is that many holders of all manner of U.S. government paper are so leveraged. As bond prices decline and yields rise, many holders are virtually compelled to sell, adding to the momentum of the market and causing selling to feed on itself. Don’t forget too that-as I wrote in last Monday’s commentary-none other than Federal Reserve Chairman Alan Greenspan himself has virtually given the green light to those wishing to sell Treasuries. He may soon regret doing so, if he doesn’t already.
While Treasury investors have had reason to reassess their previous blind faith in The Maestro, however, stock traders have yet to face such an Epiphany. If anything, cheered on by the shills in the financial media, stock investors are as cocky as they’ve been in quite a while in their belief that equities will continue to rise. Yet I have to believe that, just as reality finally decided to set in-and pretty much all at once-back in 1987, America’s fiscal and monetary mess, a declining dollar and an inexorable rise in long-term yields will pull the rug out from under the stock market once more.
The only question is when.
-Chris Temple
www.nationalinvestor.com
July 29, 2003
PLEASE REPLY TO: [email protected]
Chris Temple, Editor
The National Investor
www.nationalinvestor.com
It was the Summer of 1987. The value of the U.S. dollar against most foreign currencies was falling. Fears of the longer-term impact of escalating budget and current account imbalances were taking their toll. In response to these and related factors, gold had been rising for months. Also in response, Treasury bond yields were rising steadily; the 30-year bond, then the government’s "bellwether," moved up from a level around 7% in the Spring to approach the 10% area.
In spite of all of this and growing discussion about whether the economic fundamentals justified such levels, the stock market incredibly continued to advance. In fact, through August of 1987 the Dow Jones Industrial Average’s performance was simply breathtaking. Shrugging off the growing troubles on the inflation and interest rate fronts and all the rest, the upward momentum fed on itself. Trading at under 2,000 early on in the year, the Dow peaked in August at over 2,700.
We all know what happened next. In just under two months, the Dow shed 1,000 points; most of it came in less than a week, and half of it on Black Monday, October 19. Traders were shell-shocked; after all, nothing of this sort was supposed to ever be able to happen again. Further, we were about to go into an election year; a period when, historically, markets are strong in anticipation of all the goodies to be lavished on the economy and populace by those running for election or reelection.
Yet the stock market crashed in spectacular fashion.
As the dust was settling, President Reagan appointed a commission, headed up by former Treasury Secretary Nicholas Brady, to examine the reasons why the stock market derailed. In the end, the Brady Commission identified Japan-yes, Japan-as the chief culprit. Simply put, both public sector and private investors from that nation had for several months been demanding higher interest rates on the huge quantities of U.S. government debt they were buying. This was due to their concern over U.S. monetary and fiscal policy, both of which were making U.S. obligations relatively less attractive (and more risky) than other sovereign debt. Thus, the Japanese insisted, they wanted much higher returns if they were going to put huge quantities of their own assets into U.S. dollar-denominated securities. Eventually, those higher interest rates overwhelmed the momentum and blind faith that investors had been pricing into equities.
We’re about to enter August, 2003. Again, the foreign exchange value of the U.S. dollar has been declining. Again, the government’s budget and current account deficits are growing rapidly. Again, gold has been in an up trend due to all of this, as well as to its own strong fundamentals as a commodity. And now, long-term bond yields are spiking, as foreign investors are beginning to undermine the market for U.S. debt further.
But-as in 1987-the stock market remains oblivious to all this. Ask the stock market’s bullish advocates, and they’ll tell you that yields are rising due to investors’ optimism over the economy; after all, yields always rise when Wall Street smells economic growth and, thus, rolls money out of Treasuries and into the stock market. And, to be fair, a bit of that is indeed going on.
However, the reasons for the bond market’s sell-off of the last few weeks go way beyond such a simple, intellectually lazy explanation. Investors are ignoring to their eventual peril the fact that increasing quantities of foreign-owned U.S. dollar-denominated obligations are being disgorged-a trend which, if it goes much further, can yet lead to far higher long-term rates, even after the back-up in yields we’ve witnessed since the lows of mere weeks ago.
In 1987, it was primarily the Japanese investors’ refusal to put new money (except at much higher interest rates) into financing America’s growing deficits that caused the eventual meltdown on Wall Street. Now, what we see happening is the selling of GSE (Government-Sponsored Enterprise) paper. Specifically, it’s been acknowledged in recent days that European banks-perhaps including the European Central Bank itself-have been selling some of their holdings of Fannie Mae and Freddie Mac paper. Both deteriorating U.S. monetary and fiscal fundamentals and the increasing accounting questions over those mortgage agencies specifically have apparently led to Europeans deciding that they want to reduce their holdings of assets deemed increasingly risky.
This adds to the woes-and upward pressure on yields-in the Treasury market. GSE’s are among the biggest purchasers of Treasury securities. They also use Treasuries to hedge their mortgage positions; and now, knowledgeable people in the bond pits are warning that the recent back-up in yields and decline in prices of Treasuries could take on lives of their own. This morning, the yield on the current bellwether 10-year Treasury note is moving even higher, taking out the key technical level of 4.25%. With the momentum accelerating, a further sharp rise in yields becomes increasingly likely; and the chances for a rally in bonds that would bring yields back down more becomes remote.
One reason for the increasing danger even after the rise in yields of the last few weeks is that many holders of all manner of U.S. government paper are so leveraged. As bond prices decline and yields rise, many holders are virtually compelled to sell, adding to the momentum of the market and causing selling to feed on itself. Don’t forget too that-as I wrote in last Monday’s commentary-none other than Federal Reserve Chairman Alan Greenspan himself has virtually given the green light to those wishing to sell Treasuries. He may soon regret doing so, if he doesn’t already.
While Treasury investors have had reason to reassess their previous blind faith in The Maestro, however, stock traders have yet to face such an Epiphany. If anything, cheered on by the shills in the financial media, stock investors are as cocky as they’ve been in quite a while in their belief that equities will continue to rise. Yet I have to believe that, just as reality finally decided to set in-and pretty much all at once-back in 1987, America’s fiscal and monetary mess, a declining dollar and an inexorable rise in long-term yields will pull the rug out from under the stock market once more.
The only question is when.
-Chris Temple
www.nationalinvestor.com
July 29, 2003
PLEASE REPLY TO: [email protected]
Fleursdumal
फूल की बुराई
Thursday July 31st 2003, 3:20 PM
ODJ Debt Futures Review: 'Tremendous' Liquidation After Strong Data
-- Debt Futures Collapse After Strong GDP, Chicago PMI, Jobless Claims
-- Bonds, 10-Years Hit Contract Lows Six Weeks After Contract Highs
-- Selling Intensifies In Short End On Worries Of Possible Rate Hike
By Allen Sykora
Chicago, July 31 (OsterDowJones) - Debt futures resumed their steep downward spiral, with futures in the long end of the yield curve matching or setting contract lows just 1 1/2 months after they had soared to fresh contract highs, analysts said.
Fundamentally, much of Thursday's weakness was blamed on a series of stronger-than-expected economic reports, including gross domestic product, the Chicago Purchasing Managers Index and first-time jobless claims.
Since mid-June, while the long end of the yield curve was suffering a beating, the short end had held up reasonably well on ideas that the Federal Reserve might not begin any tightening cycle for a good, long time.
There was a slight flattening of the curve today, however, as the two-year and Eurodollar futures also were pummeled by traders second-guessing whether the Fed will wait as long to tighten as previously thought, market watchers said.
"They took a tremendous beating," said Refco Vice President Alex Manzara. "I'm sure there was just a tremendous amount of long liquidation."
In fact, Manzara pointed out that all of the federal-funds futures contracts have moved back to right around 99.0, meaning they are no longer factoring in any kind of likelihood of any further Fed easing.
Until today, he explained, "there was no market perception" of any Fed tightening on the horizon.
"So a lot of people have bought near contracts and sold things out more deferred, like 10-years," he said. "But today, the data apparently was strong enough to cause some people to question whether the Fed really is on hold. People were so complacent about the idea the Fed wasn't going to tighten, and that the only chance was for an ease, that people were long at levels that aren't really all that great.
"On a day like this, where certain people start to reassess, it starts to snowball."
An internal market factor that is contributing to the deterioration of Treasuries is a continuation of the mortgage-related selling that has been occurring for some time now, sources said.
The Sep Treasury bond futures fell as far as 105-03, matching the contract low they put in back in November. That means the market has fallen exactly 18 full points from the contract high of 123-03 put in on June 16. During the pit session, the Sep 10-year notes hit a contract low of 110-02.5 six weeks after they had put in a contract high of 120-14.
"If you would ask me to describe this market in one word, it would be either 'atypical' or 'unusual,'" said John Kosar, senior research analyst with Bianco Research, about the steep one-way move since mid-June. "You don't usually get this kind of move this hard this fast.
"I've been looking at the bond market for 20 years and I can't remember another time that we've done this. I'm sure there was, but I can't recall one right now."
Manzara described volume as "massive" with "a lot" of sell stops triggered.
Sep 10-year notes settled down 1 10/32 at 110 20/32, while Sep Treasury bonds lost 2 12/32 to 105 20/32. Mar Eurodollars tumbled 19.5 basis points to 98.46 and bottomed at 98.39, a level not seen since late April.
Kosar linked much of the weakness in the long end during recent weeks to the convexity-related selling by mortgage accounts that has been occurring as yields rise.
"It tends to make the market overshoot in both directions," he said.
Conversely, when prices were rising so sharply earlier in the summer - sending yields sharply lower - much of the impetus was the mortgage-related buying that was occurring at the time for hedging purposes, pointed out Kosar.
After the steep losses that have been occurring for some time now, said Kosar, it's hard to say just when the market might put the brakes on the skid.
"I thought we would have turned around two weeks ago," he said. "To me, a big benchmark in the 10-year yields was the Dec. 2 high at 4.348%, or basically 4.35%. We blew through that this week without even blinking."
That yield - which moves inversely to the price - got as high as 4.566% today.
"Technically, that portends higher yields and lower bond prices," said Kosar. "Do I think we're going straight to 5%? Probably not. But based on what I've seen here, all bets are off. This is not a market being moved around by 'typical' market forces."
Kosar put the next key technical level in 10-year yields at 4.6%. It would be logical to think of the contract low of 105-03 as the next near-term support in Sep bonds, he added.
"But does it really mean anything? I don't think so. I think we've blown through bigger points than that over the last couple of weeks and didn't even blink."
He added, however: "Once we do get a correction, it's probably going to be sharp and is probably going to be somewhat large - several points or more. And it could last a couple of weeks, because we're really, really overdone here."
In the meantime, though, "It's really hard to come up with short-term trading points when a market is completely out of control, as the bond market is right now."
Based on the market movement over the last several weeks, the lows in yields earlier this summer - 3.074% on June 16, according to one price vendor - could be a one-year to several-year low, commented Kosar.
"We're not going back there for a long time," he said. "Even though this is going to correct, any kind of rally in the bond market that happens into a decent level of overhead resistance is going to be sold."
Debt futures actually started the morning in positive territory, trying to build upon Wednesday's gains. They quickly headed lower, however, when virtually all of the economic data was stronger than forecast.
Still, until around an hour after the final releases of the morning, the Sep bonds held onto their recent half-year low of 106-15 hit on Tuesday. When that failed, however, the downward momentum increased, and the contract gave up more than another full point to the session low.
Likewise, Sep 10-year notes held roughly around the 111 handle after bottoming at 111-01.5, also a half-year low, on Tuesday. But when this support failed, the weakness accelerated and this contract also extended its losses by roughly another full point.
The bearish data included:
-- a rise in the Chicago Purchasing Managers Index to 55.9 in July from 52.5, when the forecast was for a more modest rise to 53.3;
-- first-time weekly jobless claims that fell 3,000 to 388,000, their second straight week below the key 400,000 level, after most consensus expectations had been for a rise to somewhere between 400,000 and 408,000; and
-- GDP that grew 2.4% during the second quarter, after consensus forecasts had called for a rise of between 1.4% and 1.6%.
The market will get another slew of economic reports on Friday, which traders will be watching for confirmation on whether the economy is in fact gaining momentum. The most closely watched releases will include:
-- non-farm payrolls, due out at 0730 CT (1230 GMT), expected to be roughly steady to up 25,000 in June, while the jobless rate holds at 6.4% or declines to 6.3%;
-- personal income (expected to rise 0.3% in June) and personal spending (forecast up 0.4%), also due out at 0730 CT;
-- the end-of-July University of Michigan consumer-sentiment report around 0845 CT (1345 GMT), expected to come in around 90.3; and
-- the Institute for Supply Management's manufacturing survey at 0900 CT (1400 GMT), with the headline number forecast to rise to 51.8 in July from 49.8 in June.
---
Allen Sykora, OsterDowJones [email protected]
ODJ Debt Futures Review: 'Tremendous' Liquidation After Strong Data
-- Debt Futures Collapse After Strong GDP, Chicago PMI, Jobless Claims
-- Bonds, 10-Years Hit Contract Lows Six Weeks After Contract Highs
-- Selling Intensifies In Short End On Worries Of Possible Rate Hike
By Allen Sykora
Chicago, July 31 (OsterDowJones) - Debt futures resumed their steep downward spiral, with futures in the long end of the yield curve matching or setting contract lows just 1 1/2 months after they had soared to fresh contract highs, analysts said.
Fundamentally, much of Thursday's weakness was blamed on a series of stronger-than-expected economic reports, including gross domestic product, the Chicago Purchasing Managers Index and first-time jobless claims.
Since mid-June, while the long end of the yield curve was suffering a beating, the short end had held up reasonably well on ideas that the Federal Reserve might not begin any tightening cycle for a good, long time.
There was a slight flattening of the curve today, however, as the two-year and Eurodollar futures also were pummeled by traders second-guessing whether the Fed will wait as long to tighten as previously thought, market watchers said.
"They took a tremendous beating," said Refco Vice President Alex Manzara. "I'm sure there was just a tremendous amount of long liquidation."
In fact, Manzara pointed out that all of the federal-funds futures contracts have moved back to right around 99.0, meaning they are no longer factoring in any kind of likelihood of any further Fed easing.
Until today, he explained, "there was no market perception" of any Fed tightening on the horizon.
"So a lot of people have bought near contracts and sold things out more deferred, like 10-years," he said. "But today, the data apparently was strong enough to cause some people to question whether the Fed really is on hold. People were so complacent about the idea the Fed wasn't going to tighten, and that the only chance was for an ease, that people were long at levels that aren't really all that great.
"On a day like this, where certain people start to reassess, it starts to snowball."
An internal market factor that is contributing to the deterioration of Treasuries is a continuation of the mortgage-related selling that has been occurring for some time now, sources said.
The Sep Treasury bond futures fell as far as 105-03, matching the contract low they put in back in November. That means the market has fallen exactly 18 full points from the contract high of 123-03 put in on June 16. During the pit session, the Sep 10-year notes hit a contract low of 110-02.5 six weeks after they had put in a contract high of 120-14.
"If you would ask me to describe this market in one word, it would be either 'atypical' or 'unusual,'" said John Kosar, senior research analyst with Bianco Research, about the steep one-way move since mid-June. "You don't usually get this kind of move this hard this fast.
"I've been looking at the bond market for 20 years and I can't remember another time that we've done this. I'm sure there was, but I can't recall one right now."
Manzara described volume as "massive" with "a lot" of sell stops triggered.
Sep 10-year notes settled down 1 10/32 at 110 20/32, while Sep Treasury bonds lost 2 12/32 to 105 20/32. Mar Eurodollars tumbled 19.5 basis points to 98.46 and bottomed at 98.39, a level not seen since late April.
Kosar linked much of the weakness in the long end during recent weeks to the convexity-related selling by mortgage accounts that has been occurring as yields rise.
"It tends to make the market overshoot in both directions," he said.
Conversely, when prices were rising so sharply earlier in the summer - sending yields sharply lower - much of the impetus was the mortgage-related buying that was occurring at the time for hedging purposes, pointed out Kosar.
After the steep losses that have been occurring for some time now, said Kosar, it's hard to say just when the market might put the brakes on the skid.
"I thought we would have turned around two weeks ago," he said. "To me, a big benchmark in the 10-year yields was the Dec. 2 high at 4.348%, or basically 4.35%. We blew through that this week without even blinking."
That yield - which moves inversely to the price - got as high as 4.566% today.
"Technically, that portends higher yields and lower bond prices," said Kosar. "Do I think we're going straight to 5%? Probably not. But based on what I've seen here, all bets are off. This is not a market being moved around by 'typical' market forces."
Kosar put the next key technical level in 10-year yields at 4.6%. It would be logical to think of the contract low of 105-03 as the next near-term support in Sep bonds, he added.
"But does it really mean anything? I don't think so. I think we've blown through bigger points than that over the last couple of weeks and didn't even blink."
He added, however: "Once we do get a correction, it's probably going to be sharp and is probably going to be somewhat large - several points or more. And it could last a couple of weeks, because we're really, really overdone here."
In the meantime, though, "It's really hard to come up with short-term trading points when a market is completely out of control, as the bond market is right now."
Based on the market movement over the last several weeks, the lows in yields earlier this summer - 3.074% on June 16, according to one price vendor - could be a one-year to several-year low, commented Kosar.
"We're not going back there for a long time," he said. "Even though this is going to correct, any kind of rally in the bond market that happens into a decent level of overhead resistance is going to be sold."
Debt futures actually started the morning in positive territory, trying to build upon Wednesday's gains. They quickly headed lower, however, when virtually all of the economic data was stronger than forecast.
Still, until around an hour after the final releases of the morning, the Sep bonds held onto their recent half-year low of 106-15 hit on Tuesday. When that failed, however, the downward momentum increased, and the contract gave up more than another full point to the session low.
Likewise, Sep 10-year notes held roughly around the 111 handle after bottoming at 111-01.5, also a half-year low, on Tuesday. But when this support failed, the weakness accelerated and this contract also extended its losses by roughly another full point.
The bearish data included:
-- a rise in the Chicago Purchasing Managers Index to 55.9 in July from 52.5, when the forecast was for a more modest rise to 53.3;
-- first-time weekly jobless claims that fell 3,000 to 388,000, their second straight week below the key 400,000 level, after most consensus expectations had been for a rise to somewhere between 400,000 and 408,000; and
-- GDP that grew 2.4% during the second quarter, after consensus forecasts had called for a rise of between 1.4% and 1.6%.
The market will get another slew of economic reports on Friday, which traders will be watching for confirmation on whether the economy is in fact gaining momentum. The most closely watched releases will include:
-- non-farm payrolls, due out at 0730 CT (1230 GMT), expected to be roughly steady to up 25,000 in June, while the jobless rate holds at 6.4% or declines to 6.3%;
-- personal income (expected to rise 0.3% in June) and personal spending (forecast up 0.4%), also due out at 0730 CT;
-- the end-of-July University of Michigan consumer-sentiment report around 0845 CT (1345 GMT), expected to come in around 90.3; and
-- the Institute for Supply Management's manufacturing survey at 0900 CT (1400 GMT), with the headline number forecast to rise to 51.8 in July from 49.8 in June.
---
Allen Sykora, OsterDowJones [email protected]
Fleursdumal
फूल की बुराई
Aik cerchi guai?!! 
guarda oggi per esempio, tutta la mattinata attorno ai 106,5 e poi in pochi minuti giù di una figura ! Io lo longo solo quando ha perso in intra un 1,5-2% per farci un pò di ticks pericolosi. Comunque se lo affronti sto mostro scrivi pure come l'hai fatto , è interessante il confronto sull'approccio a questa volatilità
guarda oggi per esempio, tutta la mattinata attorno ai 106,5 e poi in pochi minuti giù di una figura ! Io lo longo solo quando ha perso in intra un 1,5-2% per farci un pò di ticks pericolosi. Comunque se lo affronti sto mostro scrivi pure come l'hai fatto , è interessante il confronto sull'approccio a questa volatilità Similar threads
